China will fail to have 50 Fortune 500 companies by 2010

The Chinese government has set a goal to create 50 Fortune 500 companies by 2010. Lenovo is one such firm, in the PC business. Others include Huawei in telecom equipment, Haier in white goods, TCL in electronics, Shanghai Automotive Industries Corporation in cars, and so on. CEOs of large Chinese companies, most with close ties to the government, have been given marching orders to make this happen. “But don’t bet on it,” says Ravi Ramamurti, professor and faculty coordinator of international business at the College of Business Administration at Northeastern University.

“The problem is that these companies have too easy access to capital and are therefore prone to squander it. They cannot usually move fast enough because they must get the nod from the Chinese government on key decisions,” Prof. Ramamurti states. “They lack the management depth to operating globally. Even when the companies are listed on the stock exchange, they respond to government signals more than capital-market signals. Finally, their ties to the Communist government raise red flags every time they try to acquire Western companies.”

“The real hope for building world-class Chinese companies may lie in the new crop of private Chinese firms that have been popping up everywhere. These firms are nimbler, have lower costs than the giant state-dependent companies, and are much more frugal in using capital,” Prof. Ramamurti also points out. “Examples include companies like Cherry and Geely in the automotive business, which have grown growing faster both at home and abroad than their giant state-owned counterparts. I would put my money any day on these firms over the state-controlled behemoths.”

Below is a short bio for Prof. Ramamurti. Please let me know if you’d like to speak to him about this topic.

Ravi Ramamurti, Professor, International Business; Faculty Coordinator, Executive MBA program. Professor Ramamurti does research and consulting on corporate strategy and business-government relations in emerging economies. He holds a BSc degree in physics from the University of Delhi, an MBA from the Indian Institute of Management, and a DBA from Harvard University. From 1998 to 2000 he was Visiting Professor at MIT's Sloan School of Management in the Strategy and International Management group, and from 1986 to 1988, he was a visiting professor at Harvard Business School in the Business, Government, and Competition Area. He also lectures regularly at the International Institute for Management Development (IMD) in Lausanne, Switzerland. Prior to joining the College of Business Administration in 1981, he served as a consultant to the Planning Commission of the government of India, and as executive assistant to the CEO of a large engineering company. Professor Ramamurti's most recent book, Privatizing Monopolies, was published by Johns Hopkins University Press. His earlier volume, Privatization and Control of State-Owned Enterprises, co-edited with Raymond Vernon of Harvard University, was published by the World Bank. His articles have been published in a number of journals, including Academy of Management Review, California Management Review, Harvard Business History Review, International Executive, International Trade Journal, Journal of General Management, Journal of Interamerican Studies, Journal of International Business Studies, Journal of World Business, Long Range Planning, Management Science, and World Development . Professor Ramamurti has served as a consultant to several public and private firms and to the governments of Argentina, Bangladesh, Bolivia, Ecuador, Egypt, India, Indonesia, Malaysia, Mexico, Nicaragua, Saudi Arabia, and South Korea. He has also advised international agencies, among them the World Bank, United Nations, US Information Agency, and US Agency for International Development.